A Comparative Financial Analysis Of The Mobile Phone Industry Marketing Essay

A comparative financial analysis of the mobile phone industry and three of the leading mobile phone manufacturers, so as to determine the investment prospects in this particular industry.

Contents

Title Page No.

Executive Summary 3

Industry Profile 4

Effects of Recession on the Mobile Phone Industry 4

PEST Analysis of the Mobile Phone Industry 4

HTC Corporation 7

Introduction 7

SWOT Analysis

Motorola Inc. 10

Introduction 10

SWOT Analysis 10

Nokia Corporation 12

Introduction 12

SWOT Analysis 12

Financial Performance Analysis 15

HTC Corporation 15

Review of Key Financial Analysis 15

Ratio Analysis 16

Stock Review 20

Motorola Inc. 21

Review of Key Financial Analysis 21

Ratio Analysis 22

Stock Review 25

Nokia Corporation 27

Review of Key Financial Analysis 27

Ratio Analysis 28

Stock Review 32

Review by Expert Market Analysts 33

HTC Corporation 33

Motorola Inc. 33

Nokia Corporation 33

Other types of Investments 34

Savings Account 34

Fixed Rate Bonds 34

Personal Assessment 35

Recommendations 37

References 38

Appendices 45

Appendix 1

Appendix 2

Appendix 3

Appendix 4

1. Executive Summary

The mobile phone industry is perhaps one of the fastest growing industries in the world today. A mobile phone is generally accepted as a necessity for every human. It has developed so much in the recent years that it’s hard to recognize its early incarnation. The original mobile phone was the size of a brick and affordable by a select group of people. Today, mobile phones are available in all sizes to suit every individual’s needs.

But, like all other industries, this industry too has been affected by the financial crisis of 2008-2009.

In our financial analysis, we will be looking at the mobile phone industry and three of the leading mobile phone manufacturers. We will analyse the financial aspects of Nokia Corporation (NYSE: NOK), Motorola Inc., (NYSE: MOT) and HTC Corporation (TAI: 2498)

We will look at the different financial reports published in the companies’ Annual Report, and calculate the different financial ratios to understand the investment opportunities in these companies’ shares.

2. Industry Profile

The Mobile Phone Industry

The mobile phone industry has grown dramatically in recent years. According to a report published by TomiAhonen Consulting, in January 2009, there were approximately 4 billion mobile phone subscribers around the world. Out of these, around 3.1 billion were unique.

Also, new handsets have been selling at the rate of 1.15 billion per year. This figure keeps increasing year over year and so does the economy around it.

2.1 Effects of Recession on the Mobile Phone Industry

The recent financial crisis of 2008-2009 has had severe effects on most companies of the world. As such, the companies from this industry too have felt its effect. In Q3 2008, Nokia lowered its market share outlook due to the weakening global economy (Silicon.com 2008). Nokia’s global device market share was 30% in the Q3 2010, down from an estimated 34% in the Q2 2009 (Nokia Corporation 2010). Nokia announced in July 2010 that their profits had dropped by 40% (Inside Ireland 2010)

Even, HTC and Motorola have experienced slow growth as well as lower sales compared to earlier years, especially Motorola which incurred huge financial losses (HTC Annual Report-Motorola Annual Report 2008-2009).

2.2 PEST Analysis of the Mobile Phone Industry

Political / Legal

Mobile phone companies are largely multinational. As such they have to comply with the different legislations and regulatory bodies of different countries which have their own set of particular standards. An example of a regulatory authority would be the Federal Communications Commission (FCC) operating in the US and Office of Communications (Ofcom) in the UK.

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The mobile phone usage is spread geographically. As such, the companies from the mobile phone industry have a high exposure to different political climates. This increases the companies’ risk exposures. However, huge costs are incurred in complying with the different legal and reporting procedures in different countries.

Also, sometimes, companies face stiff resistance from the national governments of some countries. A recent example of such a stand-off would be the one between RIM Blackberry and the Government of India (Daily News & Analysis, 2010) and the Government of United Arab Emirates (Yahoo News, 2010).

Economic

Being global brands, mobile phone companies have to comply with the different taxation laws and trade laws applicable in the different countries of the world. Also, they have to take into account the foreign exchange rates while importing/exporting and pricing the devices. This generally has an effect on the device prices and subsequently on the operating income of the companies.

Social

Mobile phones have become an essential part of everyone’s lives. 9 in 10 adults in the US use at least one mobile device. 31% of mobile phone users check personal emails on their phones and 21% check their work emails. Internet browsing has become an important aspect of the mobile ecosystem. Approximately 1 billion users browse basic internet on their mobile devices, while around 450 million users use real internet on their devices. (Tomi Ahonen 2009)

Access to social networking sites such as Facebook and Twitter is increasingly becoming an important feature of mobile phones.

Health concerns have been raised by research institutes over the effects of radiation caused by mobile phones on the human body (NBC News 2008). Although the evidence is controversial, it has raised caution among the mobile phone users, and the companies are forced to develop new antenna systems for mobile phones to help reduce radiation.

Technological

The mobile phone industry is highly technology-driven.

Mobile phone companies have to continually adapt themselves to the rapidly changing technology and introduce new products to keep up with the technological advancements and to meet the ever-changing demands from consumers. They need to keep investing substantially in the Research & Development of new products and technologies.

2.3 HTC Corporation (TWSE: 2498)HTC Wordmark.png

2.3.1 Introduction:

HTC Corporation (HTC) is a mobile manufacturer based in Taoyuan City, Taiwan. Its principal aspects are the research, development and manufacture of smart handheld devices including smartphones and PDAs (HTC 2010).

The company is generally considered to be a pioneer in the smartphone and PDA segments of the mobile phone industry. The company initially was involved in developing smartphones based on the Windows Mobile platform, having made the world’s first PDA based on the platform (HTC 2010). However, since 2009, HTC is increasingly developing more devices based on Google Inc.’s Android Operating System. But, as a means to strengthen its relation with Microsoft, HTC has recently launched a number of devices based on Windows Phone 7 (Mann, J. 2009).

HTC is a member of the Open Handset Alliance, a group of handset manufacturers and mobile network operators dedicated to the advancement of the Android Operating System (Reardon, M. 2007).

The HTC Dream was the first mobile smartphone in the world to use the Android OS. It was marketed by T-Mobile, in some markets, as the T-Mobile G1 (Wired 2008 HTC Press Release 2008).

As of 2009, HTC obtained nearly 43.8%, 30.4% and 20.8% of its total revenue from North America, Europe and Asia, respectively (HTC Annual Report 2009).

HTC Corporation was formerly known as Hi-Tech Computer Corporation.

2.3.2 SWOT Analysis:

Strength

HTC is a leading manufacturer of smartphones. It is a pioneer in many technologies. It had developed the world’s first PDA, and also the first smartphone using Windows Mobile. Now, it is a leading manufacturer of quality Android smartphones. As such, it has a good reputation as an innovative brand.

Financial stability gives HTC the opportunity to invest heavily in Research & Development of new technologies. Despite the financial crisis, HTC is doing significantly well in 2010 (HTC Report, Q3 2010).

Also, good product quality has helped HTC establish itself as a reliable brand.

HTC has been a pioneer in many of the technologies now common in modern mobiles phones. It has a plethora of patents designed and applied to modern communication devices (Google Patents, 2010). Also its product portfolio consists of a wide variety of smartphones based on a number of smart-platforms including the Android OS, Windows Mobile, Windows Phone 7 and HTC’s own BREW OS. (HTC 2010) HTC has also developed a new cloud-based service called the HTC Sense to compliment its range of smartphones (HTCSense.com, 2010). Due to a number of quality products, HTC is steadily increasing its consumer base.

Also, HTC is involved in exclusive tie-ups with respectable cellular companies such as T-Mobile (T-Mobile G1, G2), Orange (San Francisco) and Google (Nexus One). This helps better the image of the company in consumers’ eyes.

Weaknesses

HTC does not have a big brand image compared to its rivals Nokia, RIM Blackberry and Sony Ericsson. Also, its market share is significantly lower than that of its rivals.

Also, HTC is involved in a number of law-suits with rival company Apple Inc. This is highly damaging to its reputation in the global corporate environment. (Reuters, 2010)

HTC does not have an effective marketing strategy compared to its rivals, as a result of which its new product information fails to reach the consumers.

Opportunities

There is a huge demand for smartphones in recent times. HTC has the capability to satisfy these demands. HTC can continue to develop new touchscreen technologies and better smart features.

Through effective marketing communication and public relations system, HTC can increase its brand value and target consumer base.

Furthermore, HTC can enter new markets and establish its brand there.

It can continue to develop and apply more of its innovative patents.

Threats

The threat of new technological developments and competition is high in the mobile phone industry.

Also, one of the biggest threats to modern mobile phones is the huge mindshare commanded by Apple’s iPhone and its iOS Operating System.

Every new mobile phone is consistently compared to Apple’s offering and its success or failure depends, to some extent, on how favourably it compares to the iPhone.

This threat is present for HTC too, despite its large portfolio of Android devices.

2.4 Motorola Inc. (NYSE: MOT) NYSE MOT.gifMotorola Wordmark.png

2.4.1 Introduction:

Motorola, Inc. (Motorola) is a multinational telecommunications company based in Illinois, USA. It manufactures mobile phones and also designs and sells network infrastructure to world’s leading cellular companies.

In 1986, Motorola devised the Six Sigma quality system which has become a global standard for quality improvement.

In 1991, Motorola demonstrated the world’s first working-prototype digital cellular system and phones using GSM standard in Hanover, Germany. The world’s first two-way paging system was introduced by Motorola in 1995.

Motorola’s mobile department, as of 2009, has been solely focused on Google Inc.’s Android Operating System.

Motorola is an advanced innovator of mobile phone technologies.

Motorola has just announced that its business will split into two separate publicly traded entities on January 4, 2011. The two new entities will be known as Motorola Solutions Inc. and Motorola Mobility Holdings Inc. and will continue to trade on NYSE with the new ticker symbols of MSI and MMI respectively (Reuters 2010).

2.4.2 SWOT Analysis:

Strengths

Motorola is a leading manufacturer of smartphones. It is a pioneer in many technologies. It had developed the world’s first GSM mobile phone. Now, it is one of the leading manufacturers of quality Android smartphones. As such, it has a good reputation as an innovative brand.

Financial stability gives Motorola the opportunity to invest heavily in Research & Development of new technologies.

Being the world’s oldest mobile phone brand, it has considerable brand image.

Also, Motorola’s devices have a good build quality which establishes it as a reliable mobile phone manufacturer. Motorola has developed a new interface for its mobile phones called the MotoBlur which integrates the different aspects of one’s social life. This has been quite popular with the consumers (Motorola Report, 2009).

Weaknesses

Motorola is consistently losing its market share to its rival companies.

One of the reasons is the lack of an effective marketing communication strategy and also a weak PR system. Also, Motorola fails to introduce new products as frequently as its rival companies. Motorola is also slow in providing software upgrades for its current devices, which generally has a negative impact on consumers who want to keep their devices updated to the latest software version.

Also, Motorola is involved in a number of law-suits with Apple Inc. and Microsoft Corporation over intellectual copyright infringement. This is highly damaging to its reputation in the global corporate environment. (Reuters, 2010)

Opportunities

There is a huge demand for smartphones in recent times. Motorola has the capability and technology to satisfy these demands.

Motorola can also improve its market position by means of effective marketing strategies and a better PR system. Also, Motorola can improve its after-sales service for its devices.

Threats

Apple’s iPhone and it iOS Operating System are considered a huge threat to virtually every mobile phone brand. Despite its growing portfolio of Android devices, Motorola still has to overcome Apple’s threat.

2.5 Nokia Corporation (NYSE: NOK) Nokia wordmark.png

2.5.1 Introduction

Nokia Corporation (NOKIA) is a Finnish multinational communications corporation based in Keilaniemi, Espoo, Finland. Nokia is engaged in the manufacturing of mobile devices and in converging Internet and communications industries. It has over 123,000 employees working in 120 countries. Its products are available in more than 150 countries. Nokia has global annual revenue of €41 billion and operating profit of €1.2 billion as of 2009 (Nokia Corporation 2009). It is the world’s largest manufacturer of mobile phones which currently accounts for about 36.6% of the market share for mobile phone technology (IDC 2010).

Nokia is a public limited liability company listed on the Helsinki, Frankfurt, and New York stock exchanges (Nokia Corporation 2010). Nokia plays a very large role in the economy of Finland. It is the largest company of Finland.

The brand value of Nokia is valued at $29.5 billion. It is listed as the eight most valuable global brand in the Interbrand Best Global Brands list of 2010 (Interbrand 2010) and also on Bloomberg Businessweek Best Global Brands list of 2009. It is the first non-US company to be included in the list. (Bloomberg Businessweek 2010)

2.5.2 SWOT Analysis:

Strengths

Nokia is highly respected as a global mobile brand and it has a high brand value. It is the most preferred brand for mobile phones in Europe, as of 2009 (Eurobrand 2009)

Nokia has a worldwide distribution network which makes it easier for Nokia to make its products available to wider target consumers.

Nokia has a healthy financial background, which enables Nokia to invest consistently in Research & Development.

Also, the phones made by Nokia have a fairly user-friendly interface which enables it to be accepted by a wide variety of consumers.

Nokia has a large product portfolio with something to offer to every type of consumer. It offers a wide variety of phones from the basic lower-end phones to the more expensive high-end smartphones.

Weaknesses

There are reports that indicate Nokia consistently losing its market share, as it fails to address the competition it faces from rival smartphone manufacturers like Apple Inc., RIM Blackberry and Google Inc. (Reuters 2010)

Also, Nokia is involved in several controversial law-suits with rival company Apple Inc. This is highly damaging to its reputation in the global corporate environment. (Reuters, 2010)

Nokia also lacks diversity in its managerial aspects. It has only two directors out of ten who are not Finnish. This reduces its capability to understand the different demands and trends across different parts of the world. (Nokia, 2010)

Opportunities

Nokia can increase its market presence by launching its products in new markets. It can also increase its market share in current markets by launching innovative products at competitive prices.

MeeGo is Nokia’s upcoming operating system, which if marketed and implemented properly will turn around the fortunes of Nokia.

As the mobile industry grows rapidly, Nokia can increase its market share by extensive advertisements and through effective marketing communication.

Nokia can better its reputation and increase its brand loyalty by having a healthy Public Relations System.

Threats

The threat of competition is omnipresent in the mobile industry.

The big threats to Nokia’s dominance are the smartphones developed by Apple Inc. and RIM Blackberry, which offer better products and services than Nokia.

Also, the Android Mobile Operating System developed by Google Inc. is supported by a number of other big mobile companies and is consistently increasing its market share through a variety of smartphones from the cheap to the more expensive. The phenomenal growth of Android OS is a big threat to Nokia’s devices until it can provide an Operating System that can best Google’s offering (Reuters 2010).

Financial Performance Analysis

3.1 HTC Corporation

3.1.1 Review of Key Financial Data

The statement of comprehensive income, balance sheet and statement of cash flows for HTC for the years 2006 to 2009 are represented in the tables 1, 2a, 2b, 3a and 3b respectively.

2007

We can see from the figures shown in the tables below that 2007 was an average year for HTC. The net sales have improved by 11.61% and the profit has increased by 12.76%. While the operating profit has increased 14.31%, the operating expenses have increased by a substantially more 49.97%. The main operating expenses incurred in 2007 were for selling and marketing purposes (62.30%).

2008

The net sales in 2008 increased by 22.27% and the net profit decreased marginally by 1.06%. Once again the operating expenses by 52.85% which resulted in a decrease of 0.92% in the operating profit. The main operating expenses for this year were for R&D and selling and marketing purposes which increased by 59.80% and 46.31% respectively. On the whole this year was not so bad for HTC.

2009

In this year, HTC experienced the effects of recession. The net profit decreased by 26.65% while the net sales decreased by 5.3%. Although the operating expenses have increased by just 5.93%, the operating profit hugely decreased by 25.16%. The R&D saw its expenses cut by 11.83% and the selling and marketing expenses again increased by 18.85%.

Q3 2010

When compared to Q3 2009, the net sales has increased by 39.71% and the net profit also increased by 30.97%. The operating expenses continue to increase substantially by 38.37%. However, the operating profit has increased by 31.31%. The R&D expenses increased by 16.22% and the selling and marketing expenses have shot up by 49%. On the whole, HTC recovered greatly during the first nine months of 2010.

3.1.2 Ratio Analysis

According to the data collected from the income statements, the balance sheets and the cash flow statements, the ratio analysis has been divided in five parts, Profitability, Efficiency, Liquidity, Financial and Investment. However to judge a business, getting the information about the planned ratios is also important. Getting this kind of information is hard for people outside the business. In that case, this report may be biased. The ratios are listed in table 4.

Profitability Ratios

It can be seen from the chart below that the ROCE is decreasing steadily by about 15% each year. However, ROCE of 42.77% is favourable for the company.

The operating profit margin and the gross profit margin are also decreasing, but as the chart depicts these figures are improving.

Efficiency Ratios

The average inventories period of HTC decreased from 27.8 days in 2007 to 22.4 days in 2009. This represents the decreased demand for mobile phones. The trade receivables to trade payables ratio has remained fairly constant throughout these three years.

This means that the creditor and the debtor for HTC did not change much. The sales revenue to capital employed ratio has improved from 2.3 times in 2007 to 2.56 times in 2009.

Liquidity Ratio

For the business to have good liquidity, the current ratio and the acid test ratio should generally be greater than 2. The current ratio has decreased from 2.42 times in 2007 to 1.89 times in 2009. The acid test ratio has also decreased from 2.24 times in 2007 to 1.8 times in 2009. However, HTC still has a high liquidity as its ratios are quite near to 2.

Financial Ratios

The gearing ratio for HTC is 0% for all the three years. This means that HTC has no long-term liabilities.

Also the interest cover ratio is much higher. According to these ratios, the profit for the year 2009 can cover 188,926 times the interest payable in 2009.

Investment Ratios

These ratios help investors to evaluate their investment options about HC Corporation. A dividend yield ratio of 6.65% means that investors can get a good cash return on their investment in HTC.

But the earnings per share has decreased from NT$1.56 in 2007 to NT$0.90 in 2009. Also, the P/E ratios show that the confidence among buyers of HTC shares is low.

3.1.3 Stock Review

According to The Financial Times, HTC Corp. (TWSE: 2498) has consistently outperformed the Taiwan SE Weighted Index over the last five years. On Jan 1, 2007 the common stock of HTC was priced at NT$ 645 and as of Dec 10, 2010 the price has soared to NT$ 897. This means an investment in the HTC stock gave a return of 39.07% during this period. Wright Investors’ Service has given HTC Corporation a quality rating of AAA1 (Appendix 1)

U:ManXPMy DocumentsMy Pictureshtc stock.png

Stock Performance over 5 years. Source: FT.com 2010

3.2 Motorola Inc.

3.2.1 Review of Key Financial Data

The statement of comprehensive income, balance sheet and statement of cash flows for Motorola for the years 2006 to 2009 are represented in the tables 5, 6a, 6b and 7 respectively.

2007

We can see from the information represented in the tables below that the net sales have declined by 15% and a loss has been incurred by 101%. The operating expenses have increased by 21.65% and the operating profit decreased by 114%. The main operating expenses are incurred for selling, general and administrative purposes. The dividend for 2007 was $0.20 per share. In general, we can say that 2007 was not a financial good year for Motorola.

2008

In 2008, the net sales of Motorola decreased further by 18%. Also, the net loss increased by 8561%. The operating loss increased by 332% while operating expenses increased by only 2.67%. The dividend remained constant at $0.20 per share. Overall, we can say that Motorola incurred huge losses in 2008, partly due to the recession.

2009

Financial condition of Motorola improved over the course of 2009. Although there was still a net loss incurred, it was substantially less than 2008 which decreased by 99%. The net sales decreased even further by 27%. The operating loss decreased by 94% and the operating expenses decreased by 33%. The dividend for 2009 decreased to $0.05 per share. So, we can say that, although still in loss, Motorola’s financial condition has recovered and this shows that Motorola has the ability to successfully implement solutions to its problems.

Q3 2010

From the recent financial documents of Motorola, it is clear that it is slowly recovering its business. However, the financial condition of the company is still not very good.

3.2.2 Ratio Analysis

Profitability Ratios

As per the Ratio Table (Table 8) the ROCE and the operating profit margin for Motorola have remained negative for all the three years. This means the company has incurred losses throughout these years.

But, the condition is generally improving since 2007. The gross profit margin is high for all the three years. This is not due to the product, but because of the low operating expenses.

Efficiency Ratios

The average inventories turnover period for Motorola is constantly increasing from 41 days in 2007 to 48 days in 2009. This means that there is a decreased demand for Motorola products over the years. It also means that recession has affected

Motorola too. The sales revenue to capital employed is also quite low at 0.47 times in 2007 to 0.41 times in 2009.

If trade receivables to trade payables ratio remains greater than 1, it means that the company has a good supply chain and has the ability to manage the trade receivables and trade payables. The TR/TP of Motorola is generally steady throughout these three years from 1.39 in 2007 to 1.24 in 2009.

Liquidity Ratios

The current ratio and acid test ratio of Motorola decreased from 1.78 times and 1.55 times respectively in 2007 to 1.63 times and 1.38 times respectively in 2008. However, in 2009, they increased to 1.92 times and 1.82 times respectively in 2009. This shows that the Motorola has good liquidity, although sometimes inventories can be seen as a risk to the company.

Financial Ratios

The percentage of long-term liabilities of Motorola is high, from 59.1% in 2007 to 63.5% in 2009. This is also a big risk for the company. The interest cover ratio is very low which means that Motorola does not make enough profit to pay its interests.

Investment Ratios

The dividend payout ratio shows a speculative situation of Motorola which is extremely low. Also the dividend yield ratio is low at 0.64% in 2009.

The earnings per share is low. Motorola is not earning anything on its ordinary shares in issue. Even the P/E ratio is staggeringly low which means that the investors have no confidence in Motorola’s business.

3.2.3 Stock Review

According to The Financial Times, Motorola Inc. (NYSE:MOT) has outperformed the Dow Jones Industrial Average over the last week. However, the overall performance has been mixed. On Jan 3, 2007 the common stock of Motorola was priced at $20.57 and as of Dec 10, 2010 the price has dropped to $8.64. This means an investment in the Motorola stock would have resulted in a 57.99% loss during this period. Wright Investors’ Service has given Motorola Inc. a quality rating of ABNN. (Appendix 1)

U:ManXPMy DocumentsMy Picturesmot stock.png

Stock Performance over 5 years. Source: FT.com 2010

3.3 Nokia Corporation

3.3.1 Review of Key Financial Data

The statement of comprehensive income, balance sheet and statement of cash flows for Nokia for the years 2006 to 2009 are represented in the tables 9a, 9b, 10a, 10b, 11a and 11b respectively. These are compiled from the annual financial reports of Nokia for the said years.

2007

From the figures shown in the tables below, we can see that 2007 was a particularly good year for Nokia. The net sales have increased by 24.2%; and the profit has also increased by 67.3%. Although the operating expenses have a 17.8% increase, Nokia has gained more operating profit which increased by 45.5%. The main operating expenses incurred are for Research and Development (R&D). The increase of sales and marketing expenses (32%) refers to the new products of Nokia (ibid). As can be seen from the table 2, the profit for the year is the highest compared with other years. The dividend for 2007 was €0.53 per share (ibid). Overall, 2007 was a successful year for Nokia.

2008

Nokia’s sales have decreased in 2008. The net sales also decreased by 0.7% compared to 2007; and the operating expenses have a significant increase of 33.5%. The Annual Report highlights the recession may have had a negative effect on the company’s performance. The decrease in demand from consumers led to the profits’ reduction (NOKIA, 2008). In addition, the transfer of Finnish pension liabilities is a main reason for the increase of expenses (ibid). Both in 2007 and 2008, Nokia has recruited more employees because of which the wage expenses have also increased. The dividend for the year was €0.40 per share (ibid). To sum up, this year was not so good for Nokia.

2009

In this year, Nokia’s performance declined even further. The income statement shows a significant decrease in the net profit, which is less by 93.3%. The sales and the gross profit reduced by 19.2% and 23.7% respectively. The effect of recession was still evident on Nokia’s financial performance. As a result, the investment on R&D remained same as that in 2008. Due to the reduced demand, the marketing and sales expenses have also reduced from €4830 million to $3933 million (NOKIA, 2009). The dividend for 2009 remained same at €0.40 per share. Overall, it is clear that Nokia started reducing the expenses to face lower demand in the mobile phone market.

Q3 2010

Tables 5, 6 and 7 show the income statement, balance sheet and cash flow statement of Nokia in Q3 2010.

It is clear that Nokia has slowly recovered its business in these 9 months. To be more specific, the net sales have a 4.7% increase compare to Q3 2009. Although the gross profit is lower than Q3 2009, the operating expenses have decreased substantially. In that case, the profit before tax has risen from -€426m to €403m, which is good for the company.

3.3.2 Ratio Analysis

Profitability Ratios

From the chart below it can be seen that the ROCE is steadily decreasing from 2007.

To be more speci