Splash Corporation Background The Splash Group is composed of wholly-owned Philippine companies with business interests in personal care manufacturing and marketing, international distribution, and recently, health and wellness products development and marketing. Founded in 1985, Splash was able to grow from a Php12,000 backyard business into a Php4 billion enterprise through the vision, innovation, and commitment of its founders, Dr. Rolando B. Hortaleza and Dr. Rosalinda A. Hortaleza. Being consistently in the Top 300 corporations in the Philippines since 1998, the Company has established its reputation as one of the formidable players in the Philippine personal care industry. Splash carries the brands Extraderm, Maxi-Peel, and Skin White. It also carries one of the fastest growing skin care brands in the Philippines P hilippines – – Biolink. Biolink. In 2002, the Company invested in a Php400 million state-of-the-art manufacturing complex in Canumay, Valen zuela City which is expected to meet the Company’s capacity requirements in the medium-term. The Company established the Splash Research Institute in 1997. Through state -of-the-art facilities and equipment, and a research staff of more than tha n twenty (20) chemists, pharmacists and engineers, SRI carries out the design and development of innovative products and packaging systems, thereby keeping Splash at the th e forefront of the personal and health care indu stries. It strives to maintain a two (2)-year rolling pipeline of new p roducts. SRI also ensures that all products made available to the market are backed up by rigid clinical tests to guarantee superior efficacy, safet y, stability and over-all product excellence. Splash h as grown into a multi-billion peso company, compan y, with two of its core products, exfoliant and skin whiteners, dominating their segments with market shares of 86% and 41%, respectively, based on an AC Nielsen Philippine P hilippine Retail Index Report dated June 2007. The Company is ranked sixth in the Philippine personal care industry, the only Filipino owned company compan y in the top 10.The Company aims to strengthen its presence in the personal care markets in the Asia-Pacific region and to gain a foothold in the affluent markets of Europe and North America through its health he alth and wellness products. To date, Splash has established market presence in over 30 countries through its distributors and local exporters. These countries include Algeria, Australia, Bahrain, Canada, Egypt, Hong Kong, India, Indonesia, Iran, Japan, Jordan, Korea, Kuwait, Lebanon, Malaysia, Nigeria, Oman, Pakistan, Qatar, Saudi Arabia, Singapore, Sudan, United Arab Emirates, Vietnam and the United States.
Early beginnings Splash Corporation started out in 1985 as just a backyard business when the Hortalezas de cided to invest their P12,000 cash gifts from their wedding and put and put up RBH Cosmetics. The company’s very first products were repackaged acetone and cuticle remover. In 1987, Hortaleza, seeing a fad in growing hair-style decided to sell high-qu ality but affordable hair spray, letting the company earned its first one million peso in sales. The couple ev entually renamed their company to Splash Cosmetics from Hortaleza Cosmetics. In 1993, the Hortalezas were able to afford sophisticated technologies and renamed the company to Splash Manufacturing Corporation. By 1997, Splash established the Splash Research Institute complete with state-of-the-art facilities and equipment, and a research staff of more than 2 0
chemists, pharmacists and engineers. Its main purpose is to design and d evelop of innovative products and packaging systems. Splash tries to keep a two year rolling pipeline of new products, backed by rigid clinical tests.
General Splash corporation was incorporated and registered with the Philippine Securities and Stock Exchange on September 30, 1991. On November 15, 2007, the company’s shares of stock were th listed and traded in the Philippine Stock Exchange. Its registered address is 5 Floor W-Office th th Building, 11 Avenue corner 28 Street, Bonifacio Global City, Taguig City. Since the company’s incorporation in 1991, it has expanded and broadened its horizon. To accelerate its international expansion, on August 5, 2009 P.T. Splash Cahaya was incorporated in Indonesia. In 2010, the following subsidiaries were also established: Splash H&B SDN BHD in Malaysia, Splash H&B Limited in Nigeria, Splash Global P TE. LTD., in Singapore. The company also established a representative office in Vietnam in 2010. To further strengthen its distribution in the Philippines, the company established Acceleron Distribution Corporation (ADC) in December 2009. In January 2012, SEC approved the change of ADC’s corporate name to Prime Global Distribution Corporation (PGDC). In 2009, the company created a new revenue stream by going into the direct selling business and reach into its undeserved market. Direct selling is a very personal and intimate way of reaching the target market. The first branch in Starmall Shaw Blvd. was launched in November 2009. As of December 31, 2011, it has put up 12 branches and 22 independent business contractors nationwide. The Group marked its entry into the food business with the purchase of 80% of equity of Barrio Fiesta Manufacturing Corporation for P472 million on August 2011. Splash Corporation and its subsidiaries have 428 emplo yees in the Philippines and abroad engaged in the research and development, manufacture and sale of a broad range of health and beauty products. The Group’s consolidated revenues totalled P3,250 million in 2011; P2,988 in 2010; and P2,722 million in 2009. There were no material reclassifications, merger, consolidation, nor any ba nkruptcy, receivership, or similar proceedings filed during the period.
Corporate Cause We shall uplift the pride and economic well-being of the societies we serve. Mission Splash is a world-class company that is committed to making accessible, innovative, high-quality and value personal care products for everyone.
Vision We are a marketing company in the beauty, personal and healthcare industries where we shall be known for strong brand management of pioneering, high-quality and innovative products derived from extensive research, to improve the well-being of ou r consumers. We shall do this through: Leading edge trade and consumer marketing systems. Pursuit of excellence in all other business systems. We shall be generous in sharing the rewards with our employees, business partners, stockholders and our community for the realization of our corporate cause.
Core Values Faith in the Almighty We believe that our success is made possible by the infinite goodness and guidance of God. All our triumphs, therefore, are dedicated to His greater hono r and glory. Ethical Governance Our organization shall uphold the highest levels of ethical standards and professionalism in the conduct of its business. Personal Integrity We are committed to uphold honesty when conducting business. Our career is based on ethics. Our service, founded on sincerity. Sense of Belonging We are colleagues, friends, one family. We shall maintain a strong relationship among individuals in our organization, based on genuine caring, understanding, and righteousness. Social Responsibility We pursue social responsibility by giving back to the community and making contributions of enduring value. Customer Orientation We listen to our consumers. We get to know them. Because we exist for them, their deepest desires fuel ours. They are our true partners in innovation. Productivity & Excellence We aim to go beyond our limits. We seek to be better by doing things right, by working smart. And thus, produce more than expected, and deliver even before the expected time. Pioneering and Innovative By driving opportunities and challenging the status qu o, we are able to come up with breakthrough, first-in-the-market, value-adding products. Business Developments
In 2002, Splash invested in a P400 million state-of-the-art manufacturing complex in Canumay, Valenzuela City which is expected to meet the Company's capacity requirements in the medium-term. On November 15, 2007, the Splash’s shares of stocks were listed in the Philippine Stock Exchange under the stock symbol SPH.
In 2009, the company made three major moves. In August, P.T. Splash Cahaya was incorporated in Indonesia as part of company’s expansion overseas. On November, the company went into the direct selling business by launching the First Business Center. A month later, Splash established the Acceleron Distribution Corporation to distribute certain brands to large-scale supermarkets.
Segments of Business Splash Corporation’s brands continue to maintain their leadership and dominant positions in the categories where they compete, despite the influx of new, competitive products. Whitening: While having stable market share, Skin White regains its po sition as number 1 whitening lotion as its transition to the new packaging is close to completion and stocks are more available at the trade outlets. Skin White Soap continues to be threatened by the launch and introduction of new scientific soaps with international brand recall as well as the a ggressive and perpetual building activities as buy-one, take-one, of local pla yers. Exfoliant: After gaining 3 points from the last period, Maxi -Peel Soap continues its growth momentum gaining another 5 points in December to push it over 80% share of the market. The continued gains are due to its consistent in-store promo and awareness generated by airing a soap-specific T.V. commercial in May. Maxi-Peel Solution remained stable as it continued its dominance and ownership of the face solution segment. Hair: Kolours Hair Dye’s 3 points share gains makes it again the dominant and leading premium hair dye brand in the industry. In-store brand ambassadors and push girls helped the brand’s improved shares. Vitress shares slipped slightly but continue to be the far dominant hair cuticle cost in the country, its slight share decline was due to the steep price discounting of its competitor. In 2009, Splash renamed its product categories from Skin Care into Skin Whitening. This segment contributed 45.6% of the compan y’s revenues in 2009. Skin White leads this segment with P1.06 billion sales. Skin Exfoliant’s leading brand is Maxipeel. Total revenues for this brand amounted to P930 million in 2009. Under the Hair Care, Kolours and Vitress are leading brands in the Premium Hair Dye category and hair cuticle coat category respectively. Food supplement consist of products with naturally-derived ingredients which promote health and general well-being. Brand under the food supplement is the Theraherb VCO.
Distribution Channels The Group primarily sells its major products to supermarkets and drugstore , top wholesalers, large convenience stores, and regional distributors. The regional distributors handle two other major trade groups namely Modern Trade and General Trade. Modern trade consists of all large accounts outside of the top supermarkets. Gene ral Trade is composed of small retail trade outlets including groceries, drugstores, sari-sari stores and market stalls. With the launch of the direct selling business in November 2009, the compan y increased its distribution through the independent dealers. International Operations use local consolidators and i n country distributors to sell its products nationwide.
Competition All of the Group’s product lines compete with both large and small companies in the country and abroad. In order to succeed, the Group competes by differentiating its product offerings through innovation. It therefore avoids head-to-head competition with large global companies by targeting market niches that it can probably develop. The company considers as its principal competitors the following global cosmetic and personal care companies:
Unilever Philippines Inc.
Colgate Palmolive Phils. Inc.
Procter and Gamble Phils. Inc.
L’Oreal Philippines Inc.
Beiersdorf AG
Johnson & Johnson, Phils. Inc.
Avon Cosmetics Inc.
According to the AC Nielsen, data shows that Splash Corporation is still the leading local personal care company that ranks behind Unilever and Procter and Gamble.
Sourcing and Access to Raw Materials Splash Corporation uses raw materials that are commonly and readily available. Value creation comes from the mixture and synergy of chosen materials. To safeguard the confidentiality of product formulations, these materials are coded and known only to senior research and development officers. The company purchases mo st of its raw material requirement locally to ensure short delivery lead times. Imported raw materials are procured through the representatives or local affiliates of foreign suppliers. Purchases are paid in pesos so that currency risks are not taken.
Furthermore, the Company normally has 2 or more accredited suppliers for each type of raw and packaging materials, ensuring uninterrupted availability. The company avails of 60 to 90 day payment terms provided by suppliers. There is no existing major supply contract. Corporate Social Responsibility
The Hortalezas founded the Splash Foundation, Incorporated in 1997 to promote Corporate Social Responsibility (CSR). Its name was changed in 2009 to AngHortaleza Foundation as the link between Splash Corporation, HBC Group an d World Partners Group. Among its notable projects are:
Basic Cosmetology
Basic Reflexology and Therapeutic Massage
AngHortaleza Foundation Social Development Center
Mag-impok Para sa Kinabukasan
Teachers’ Training Development Program
Adopt a School Program
Splash Corporation Financial Statement Analysis Statement of the Problem
Whether to invest or not to invest in the stocks of Splash Corporation or to its competitor? Which is more profitable? Objective
To show the position of the Splash Corporation in terms of its liquidity and profitability. COMMON SIZE FINANCIAL STATEMENT ANALYSIS Vertical Analysis Splash Corporation Consolidated Income Statement 2011
2010
2009
99.92%
99.93%
99.91%
Sale of Services
0.08%
0.07%
0.09%
Total
100%
100%
100%
46.83%
45.34%
54.21%
0.04%
0.06%
0.09%
46.87%
45.40%
54.28%
53.13%
54.60%
45.71%
-36.04%
-35.43%
-32.76%
-15%
-14.44%
-12.84%
Interest Income
1.37%
1.97%
2.69%
Other Income
0.49%
0.82%
3.28%
Other Charges
-0.41%
-1.03%
-0.13%
2.58%
4.64%
0.71%
Current
0.62%
0.32%
0.21%
Deferred
-0.49%
-0.52%
-0.37%
2.46%
4.84%
0.87%
Net Sales Sale of Goods
Cost of Goods Sold Cost of goods sold Cost of Services Total
Gross Profit Selling Expenses General & Administrative Expenses
Interest Before Income & Taxes Provision for (benefit from) Income Tax
Net Income
Analysis
Though there had been a continuous increase in gross profit since 2009,2011 income statement still resulted in a decline by 2.38% due to increases in General and Administrative Expenses and Selling Expenses. Horizontal Analysis Splash Corporation Consolidated Income Statement 2011
2010
2009
Sale of Goods
129.33%
109.81%
100%
Sale of Services
110.52%
87.70%
100%
Total
129.31%
109.79%
100%
111.72%
91.83%
100%
57.64%
80.13%
100%
111.63%
91.81%
100%
Gross Profit
150.31%
131.15%
100%
Selling Expenses
142.27%
118.77%
100%
General & Administrative Expenses
151.04%
123.42%
100%
Interest Income
65.84%
80.28%
100%
Other Income
54.31%
88.62%
100%
Other Charges
194.92%
275.19%
100%
Interest Before Income & Taxes
426.77%
901.05%
100%
Current
378.89%
165.82%
100%
Deferred
170.79%
152.90%
100%
364.18%
609.38%
100%
Net Sales
Cost of Goods Sold Cost of goods sold Cost of Services Total
Provision for (benefit from) Income Tax
Net Income
Analysis
Net sales continued to increase during 2009 to 2011 by 19.5% but cost of goods sold also increased by 19.89%, having a net disadvantage of .39%. Gross Profit increased from year to year, but so too th e selling expenses and administrative and general expenses. Net Income resulted in a decline of 245.2% from last year’s 609.38% of net income.
Recommendation
Conclusion
We therefore conclude that the Splash Corporation is a developing Corporation and the decline in its 2011 income doesn’t mean it is going down. The decline has been the result of expansion that resulted to higher amounts of expenses for the specific year.
