Accounts payable turnover of manufacturers of perfumery products

Information agency Credinform prepared a ranking of Russian perfume companies.

The companies with the highest volume of revenue were selected for this ranking according to the data from the Statistical Register for the latest available period (for the year 2013). These enterprises were ranked by increase in values of accounts payable turnover. 

Accounts payable turnover/ payables turnover (in times) is the relation of average accounts payable for the period to sales revenue. The ratio shows, how many times (a year, a s a rule) an enterprise has discharged the average amount of its accounts payable.

The ratio of accounts payable turnover reflects the process of debt repayment to contractors (partners, suppliers, dealers etc). The ratio determines the number of debts satisfied by a firm and is calculated to estimate the cash flows, that allows to draw conclusions about the operating efficiency of an enterprise and chosen financial strategy of the management.

The higher is the mentioned ratio, the soonest a company pays up debts to its supplies. Decline in turnover can mean as well problems with the settlement of accounts, as a more effective organization of relationships with suppliers, which provides a more convenient, deferred payment plan and uses the accounts payable as a source of getting of cheap financial resources.

For getting of the most comprehensive and fair picture of the financial standing of an enterprise it is necessary to pay attention not only to industry-average indicators, but also to all presented combination of financial indicators and company’s ratios. 

Accounts payable turnover of the largest manufacturers of perfumery (TOP-10) ranges from 76 days (Kosmeticheskoe ob’edinenie Svoboda OJSC) up to 25 days (L`Oreal CJSC). As it can be seen from the picture, the higher is the annual turnover of the company, the less number of times it can repay its debts to the contractors.

Picture 1. Accounts payable turnover and revenue of the largest manufacturers of perfumery products (TOP-10)

Annual revenue of the TOP-10 market leaders made 87,9 bln RUB, following the results of the latest published financial statement (for 2013), that is by 6,1% higher than in the previous reporting period.

Payables turnover of the leader on turnover of the Russian market of perfumery products, the company L`OREAL CJSC, is below the average values of the TOP-10 group - 25 times a year on the average. 

The history of L'Oréal in Russia has been starting since 1990, when a Soviet-French joint venture was founded, which manufactured shampoos Elsève, hair dyes Recital and perfumes Maroussia.

The Russian branch of L’Oréal was organized in 1994 and until 2003 it was known as Rusbel CJSC, in 2003 it was renamed into L’Oréal CJSC. Activity of the branch began with the promotion of goods under the brands “L’Oréal Paris” and “Laboratoires Garnier” in the framework of mass-market products.

Today, L'Oréal is present in all distribution channels in Russia: beauty salons, pharmacies, supermarkets, and an exceptional range of brands takes a leadership position in many market segments, such as make-up, hair care, body care, perfumery etc.

The second company of the industry, Oriflame Cosmetics LLC, leads his longtime rival in the speed of accounts payable turnover (31 times).

Oriflame is the leading cosmetics company in the market of direct sales. The company's products are represented in more than 60 countries, and more than a half of them occupies a leading position in the market.

All participants of the TOP-10 list got high and the highest solvency index, this fact points to companies’ ability to pay off their debts in time and fully, while risk of default is minimal.