Eroski financial situation

Eroski is a Spanish supermarket chain with nearly 1,000 outlets spread across Spain (excluding franchises). It is run as a worker-consumer hybrid co-operative within the Mondragon Corporation group. The establishments vary in size from the largest hypermarkets, simply named ‘Eroski’ (of which there are 75 stores, including 40 with petrol stations), down to smaller ‘Eroski Center’ stores (473, including 2 petrol stations). There are also 219 ‘Eroski City’ outlets, 234 ‘Eroski Viajes’ travel agent centres and 44 ‘Forum Sport’ sport clothing stores. The group’s total sales floor space is approximately 1,500,000 square metres.

At the end of fiscal year 2010, Eroski has obtained an increased by 17% in the Operating profit, reaching 100million €. Furthermore, Eroski has reduced their financial expenses, so there is a increased in the EBIT by 20.4 million €. Eroski repeats EBITDA, 419 million €

In order to face the crisis, the decrease of the activity and the increase of the IVA, Eroski has made an important reduction of their prices and has intensified the return of money to banks in order to reduce their financial debt.

Let’s see Eroski’s figures step by step (measured in million €):

Assets=3.432.654

Current Assets– 1.471.762

The 65% of CA comes from Long-term investment in partners and supply enterprises.

Non Current Assets– 1.960.892

The 65% of NCA comes from investments in partners and suppliers too, but in this case the investments are in short-term

Equity-Liabilities=3.432.654

Equity- 1.851.248 (54%)

Non Current Liabilities- 855.570 (25%)

Current Liabilities- 725.830 (21%)

Indicators

General Liquidity Radio= 2,03

Acid test= 1,87

General Liquidity Radio is more representative in this case because the inventory is very liquid. It measures the relation between the avaibility of cash in the short term and the cash required in the short term to meet the corresponding debt.

Acc. Payable Period= 57 days

Acc. Receivable Period= 32 days

This is the common situation, because the company must always seek to recover as quickly as possible and pay as late as possible.

Inventory Turnover= 13.9

The inventory is sold many times during the year. This means high efficiency.

Assets Turnover= 0.59

So the efficiency of the company in order to use its assets to generate sales income for the company is low.

Sources:

www.eroski.es

http://www.cnmv.es/AUDITA/2011/13268.pdf

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