Financial Analysis of Symrise Group

Characterization of Symrise Group

This assignment requires an analysis of the financial situation of the Symrise Group. The parent company  is Symrise Aktiengesellschaft, based in Holzminden, Germany. Accounting information can be found at  https://www.symrise.com/newsroom/downloads/. For the purpose of this assignment, treat the entire group as if it were a single entity. 
1. Provide a brief characterisation of the company. Please put more emphasis on the financial  situation (such as components of cash flows and the stock price) relative to other aspects (such  as strategy or marketing), but do not ignore the latter. (12 marks) 
2. Describe the development of the capital structure of the firm. What were the likely drivers of past  capital structure changes? Could you identify a target capital structure and, if so, how? Check  whether any of the main capital structure theories appear to apply to this firm. Please justify your answer. Your analysis should cover at least the last ten years for which data is available. (30 marks) 
3. Given the current situation of the firm, what capital structure would you advise the firm to aim  for? Should the firm adjust its current dividend policy? Please justify your answer. (10 marks)  4. Calculate the cost of equity of Symrise Group. Please describe in detail what calculations you  perform, what inputs you use and justify any assumptions you have to make. (20 marks) 
5. Calculate the cost of debt of Symrise Group. Please describe in detail what calculations you  perform, what inputs you use and justify any assumptions you have to make. (16 marks) 
6. Briefly describe how you would calculate Symrise’s weighted average cost of capital (WACC).  No actual WACC calculation is required. (12 marks)

You will be given the opportunity to submit a spreadsheet with calculations alongside the pdf containing  the answers to the questions. The company website at www.symrise.com is quite informative, also w.r.t.  financial information above and beyond the financial statements. 
Question 1: requires data collection and condensed data presentation using graphs etc. Cash flow 
Dynamics of key figures such as revenues and cash costs, balance sheet total, working capital, capital expenditure Other important aspects around cash flow Risk in operating cash flow (business risk), other risks Market price of equity Absolute performance Performance relative to MDAX performance relative to peers of which there are not many Debt performance and debt ratings, if any A SWOT and/or PESTLE analysis M&A activity if any 
Question 2: in part descriptive, in part analytic Description of capital structure over time Market values for equity Market values for debt where available (less straightforward) Net working capital to be used Correction for excess cash holdings (if any) 
Question 3: recommendation of capital structure and payout policy in times of the COVID pandemic answer will depend, among others, on most recent macro, industry and company figures Aspects to be covered include rate of burning available cash, access to credit lines even in times of crisis, impact of vaccines on speed of economic recovery payout recommendation requires a some data collection/ analysis of dividend policy so far recommendations depend on judgement about COVID impact in relation to how healthy the company’s business model is 
Question 4: requires a detailed cost of equity calculation Cost of equity  Collect stock price and index data, calculate beta  Apply CAPM to obtain cost of equity estimate Discuss alternatives and use them as a robustness check Choice of right risk-free rate Excellent source: A. Damodaran (2012): Investment Valuation: Tools and Techniques for Determining the Value of Any Asset, 3rd edition, Elsevier 
Question 5: requires a detailed cost of debt calculation Interest-bearing debt correction if needed 
Company has listed debt in the form of three recently issued bonds 
External rating agency’s rating or synthetic rating, to be derived from EBITDA/interest expense ratios or the like; credit spreads for similar ratings to be identified and applied Effective tax rate calculation 
Question 6: students should not actually calculate WACC; but just describe the steps needed Proportions of debt and equity, in market values (if possible), corrected for cash holdings  Straightforward to answer