Cargills (Ceylon) PLC

Cargills’ revenue growth has been accelerating over the past four years. Gross profit has held consistent at just under 6%, however net profit eroded slowly from 2.3% in 2005 down to just 1% in 2008, a worrying sign that SG&A (sales, general, and administrative expenses) costs are creeping up. Inventory turns have decreased in the three most recent years which could be contributing to the decline in net margin, but further investigation would be needed to verify that. One potential point of concern is that Cargills is also carrying quite a bit of debt, with current liabilities consistently exceeding current assets and financing costs that have been as much as half of EBIT (earnings before interest and tax).