Torment employs approximately 4000 people in over 1 1 0 locations. The company is hoping to achieve an 18% after tax return on opening shareholders’ equity over a business cycle. Additionally as a performance objective, the company aims to earn threshold pre-tax returns on invested capital in the rage of 17%-25% depending on the business. The company uses a number of grog. Vet strategies to assume the title of market leader. They have policies to expand markets, strengthen product support, have more broad product offerings, invest in resources such as employee training and development, and of course to maintain a strong financial session.
Torment Industries Ltd. Have a favorable employee-shareholder culture and they have diversified business with leading brands. The company is also enjoying a stable financial condition, with revenues, net earnings, and return on shareholders equity increasing in the last 3 years. The company is also witnessing an increase in stock prices from October 201 3 after a period of stable prices. The company has also announced an 8% increase in its regular quarterly dividend on February 1 1, 2013. Industry Overview and Competitive Positioning PEST Analysis Porters 5 Forces Bargaining Power of Suppliers:
Bargaining Power of Customers: Threat of New Entrants: Threat of Substitute Products: Competitive Rivalry within an industry: SOOT Analysis Strengths: Distributor of a strong brand Comprehensive product support capabilities Weaknesses: One of the weaknesses associated with Torment Industries Ltd. Is the geographic concentration. Torment operations are situated in a limited areas and markets, focusing on the United States and Canada. According to Torment company profile, ‘the company generated 97. 6%of its revenues from Canada, while generating the remaining 2. 4% from other countries.
The fact that majority of Torments revenues come from one concentrated area can lead the company to engage in risks that are associated with dependence in one specific region. Opportunities: Growing equipment rental business in the US and Canada. Positive outlook of the US mining equipment market As the market declined in 2009 it has recovered well in the current years and is producing growth. Threats: The major threat that is faced by Torment is the increased competitive pressures. As Torment focuses on one primary market that is highly competitive there are a large number of companies who re providing services to the same customers.
Referring to the company profile some of the major competitors of Torment are NEST Holdings, United Rentals and Industrial Engines. Another threat is the environmental regulation. This could negatively impact the business. Depending on the region where Torment decides to provide its services, the legislations could drive the cost of products to go up. The company will also have to follow the environmental laws in place for that particular region and if the company violates any of these laws it can find itself charged with penalties or fines which could greatly affect the financial of the company.
Demand Fluctuations due to Financial Analysis Common-Size Financial Statements a) Referring to In the years 2008-2009 Torment gained all their revenues through historical segments, including while in 201 0 they began gaining some revenue from the Equipment Group. In 2011 and 2012, revenues were flowing mainly from Queue intent group while a small portion was coming from COMIC with a slight overall increase in 2012 compared to the previous year. B) c) In a lot of respects, Torment can be viewed as a profitable company.
All reparability ratios in the Facts database point to this conclusion, as they are all positive (Facts, 2013). These include gross margin percentage, operating margin percentage, net margin, and ROE/DuPont Ratio (Facts, 2013). Torment has never reported a loss in profitability in the last 5 years and all profitability ratios are trending upwards (except for net revenue, which decreased in 201 1 due to the split of Enrollee) (Facts, 2013). When margins are compared to other companies in the industry, Torment either are very close to the average or exceed competitors margins in 2012.
Payable turnover dropped to 2. 7 days in 2011. Metrics such as days payable outstanding and days of inventory on hand also increased (Facts, 2013). Cash flows from receivables increased but were not enough to offset the aforementioned events. In 201 2, net operating cash flow dropped considerably. This was due to a negative cash flow from receivables and further decreases in accounts payable cash flow. The cash conversion cycle was stable at around 85 days. Days of inventory on hand also decreased to around 100 days (Facts, 2013).
This suggests that accounts payable outflow increased due to increased sales. Sales initially seemed to have tanked in 2011 , but this is due to a split within the company (Torment, 2011 Revenues from the remaining parts of the business increased by 14% to SSL . 4 billion and this increase can explain the growth of accounts payable Torment, 201 1). The working capital cash flow decreased in 2012, but the productivity ratios all remain within acceptable values. Working capital was mainly affected by increases in accounts receivable, inventories, and accounts payable in 201 0 (Facts, 2013).
Working capital will rebound if Torment continues on their trend of lowering accounts payable. As for investing activities, a major increase was reported in 2011. This was due to an increase of $130 million from other sources (Facts, 2013). These ‘other sources’ consisted of cash flows from the discontinued operation of Enrollee (Torment, 201 1). Capital expenditures increased from about $82 million to $1 14 million. Major events in financing cash flow were in 2011. In 201 1, Torment made a reduction in debt in the amount of about $290 million. This led to a cash outflow of $337 million.
Risks Torment Industries Ltd. Have been doing well in the recent periods after a series of instability primarily in 201 0 when the company witnessed an overall decrease in every performance aspects. The economy is witnessing slow growth. A main area of concern would be the mining sector of Equipment Group, where they witnessed a 18% decline in mining revenue even though instruction related markets such as road building and infrastructure development have got better. So it can be analyses that the mining sector is not doing well and is witnessing a fall in revenue while the activities of Equipment Group appreciating.
At the same time the high number of Equipment Group backlogs is to be taken into consideration, while the numbers are decreasing it is still high and it is stemming from the unavailability of equipment and the mining deliveries may not have been done at the right time. For COMIC the backlogs are a major concern where it is present in both recreational and industrial areas. A major source of risk for Torment would be its limited geographical presence and Infrastructure in markets. The company operates primarily in the US and Canada where 97. 6% of the revenue generated from Canada while the remaining from other countries.
This is a disadvantage in today’s globalizes world where geography is not a barrier anymore, so the high dependence on the home country for revenues would be more prone to risk because of geographical threats. The industry itself is facing increasing complications as days pass. Because of the highly polluting activities of the industry there has been more environmental saws and regulations put into effect. As a result of the emphasis to ‘go green’ the company could potentially face an increase in the cost of production and a general steady decline in customers in certain areas.
The company has to be highly vigilant regarding the existing and new environmental laws put into place as one slip may result in severe legal consequences and a blow to the it’s financial standings and growth. COMIC is facing a backslash in their recreational revenue which went down 45% from last year because of a Canadian federal stimulus program, additionally things were not looking good n the LIST with recreational and industrial packages lower by 20%.. Torsion’s main sources of earnings are from their Equipment Group revenues as well as their COMIC revenues.
Within the Equipment Group, Torsion’s revenues were obtained from their equipment sales (new and used), rentals for their products as well as product support services provided by the company. Power generation is a service that Torment focuses on but was not a significant contributor to their revenues as the main focus of the operation was on equipment and product support. Used equipment sales included the sales of the used equipment itself in addition to the received equipment on trade-in and dispositions from the Company’s rental fleet.
The rental services provided by Torment included light and heavy equipment ranging from dozens, excavators, graders and trucks. Rental revenues improved in 201 2 due to increased investment and improved utilization. Torment invested $55 million net of disposals for their rental fleet, which was $20 million more than their investments in 2011. With improved market conditions in the economy paired with strong sales in existing locations lead to overall increases in revenue for Torment. Along with increased investments, Torment set record numbers in 201 2 with product support revenues improving by 16% in comparison to 201 1.
This can be attributed to the increased number of installed bases of equipment in the territories of operation in addition to greater utilization of equipment. With increased employment and addition of technicians, the service aspect of operation for Torment was a strong driver in increased revenues and success. COMIC Refrigeration is a division of Torment Industries and specializes in the engineering, design, manufacture, installation and service of industrial, recess cooling and recreational refrigeration system.
Some the industries that COMIC Refrigeration provides services for includes Food and Beverage, Pharmaceutical, Automotive, Chemical and Petrochemical and Mining. Package sales and product support for these services are the primary sources of revenue for Comic’s operations. Examining Trombones data over the past 5 years, it has been a profitable company. In 2008, the global recession interrupted and disrupted the growth of the company; however, profitability as well as the assets of the company have remained strong.
Since the economic recession in 2008, revenues for the company have increased at an average annual rate of 4. 1 % and product support revenue which has been a strong driver in the profitability of the business have averaged an even better 6. 9% growth on an annual basis. This has been aided by the increase in customer demand in specific market segment such as mining, increased product offerings and services spearheaded by Caterpillar and several acquisitions within the Equipment Group’s operations for rental products and services.