Research

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A Comparative Analysis of Century Pacific Food, Inc. Financial Performance Before

and After its Acquisition of Ligo Sardines in the year 2019-2022
A Research Proposal
Presented to the University of Research Office
Holy Angel University

Submitted by

Nicole Ann Regala

Jeramie Salenga

Jaime Gabriel Santos

Alexis Carlo Tadeo

Mae Justine Joy Tajonera

Andrei Matthew Viuya

Date of Submission

January 30, 2023

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A Comparative Analysis of Century Pacific Food, Inc. Financial Performance Before

and After its Acquisition of Ligo Sardines in the year 2019-2022

INTRODUCTION

Food processing continues to be the Philippines' most dominant industry despite a

continuous increase in the number of businesses operating, conforming to Market Research

(2022). The basic preparation of foods, the transformation of a food product into a different

form, and preservation and packaging methods all fall under the category of the food

processing industry (Lotha, 2021). As one of the biggest and leading canned food

manufacturers, Century Pacific Food Inc. (CNPF) is one of the businesses vying in this

sector.

Most people in industrialized, developing nations consume a substantial amount of

canned food since it is readily available all year long and comes conveniently (Pither, 2003,

p. 845). Sardines in cans are frequently used as a gauge of the Philippine economy. The

former is one of the primary sources of cheap animal protein for lower-income Filipinos.

They make the ideal food since they are filling, affordable, and have a strong flavor and

texture that contrast nicely with rice, the country's main staple. Sardines in cans are

undoubtedly practical for consumers (Rola et al., 2018). Because of this, CNPF continues to

experience flourishing business results. However, to ensure that their performance is

sustained, businesses must act in accordance with market demands, as success attracts new

competitors and competitive pressures.

Moreover, each business will always try to avoid an environment of unfair

competition and will typically compete against one another due to the industry's inevitable
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rivalry. Unknowingly, the businesses competing will suffer from such an environment.

Expanding is one of the business strategies that can be used to contend with other companies

– making acquisitions can be carried out. When one company buys the majority or all the

shares of another company, this is referred to as an acquisition, according to Kenton (2022).

Carrying acquisition as a strategy can have a profound impact, including an appealing

portfolio of assets, more resources, and dominance. Picardo (2022), nonetheless, asserts that

while an acquisition can transform the acquiring company practically overnight, there is also

a sizable amount of risk involved, such as integration risk, overpayment, and culture clash.

Hence, a company should first analyze the advantages and disadvantages that will be

presented by the business deal to achieve rapid growth over a short period without

experiencing negative aftermath. As according to CFI (2022), one of the most effective ways

for a company to grow is through a well-executed strategic acquisition that benefits from

potential synergies.

Furthermore, in light of the phenomenon of rising acquisition activity, many recent

research findings still claim that acquisition has little to no impact on a company's financial

performance. Nevertheless, this study intends to evaluate whether Century Pacific Food Inc.'s

acquisition of Ligo Sardines will influence the company's financial results from 2019 to

2022. Notably, the management of CNPF claimed that the acquisition would raise sales and

profits for the business. (Malaya, 2022).

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REVIEW OF RELATED LITERATURE

Food Processing Industry

In accordance with Zheng J and Xiao H (2022). Food processing is significant in our

daily lives because it encompasses a wide range of food material treatments, including

mechanical processing, heating, cooling, drying, high pressure, acid and alkaline processing,

fermentation, and more. From the point of harvest to the finished food products we consume

processed, unprocessed, and ultra-processed food processing may entail all of these phases.

These processes have a substantial impact on how food components interact with one another

and how they are composed and structured  which has a significant impact on how well they

affect the health of consumers. 

Most agricultural goods are temporary and perishable. Consumable food products are

created through the food processing of raw components. It makes a variety of meals available

all year long. Food is protected from the environment, has a longer shelf life, and has a great

quality because of having a good packaging in accordance with Sadiku M, Musa S, Ashaolu

T (2019). The processed food industry is at the crossroads of supply and demand, and it has

the power to affect both on-farm operations and consumer habits. Taking advantage of

significant synergies across policy sectors is possible with interventions that focus on the

processed food industry as stated by OECD (2021). Machado, et al. (2020) stated that the

consumption of processed food is prevalent internationally even though it has negative

effects on health. This is made possible through investment and exports of goods as raw

materials or as the final product, the processed food. The ultra-processed food (UPF)

consumption is found higher in high-income countries and middle-income countries

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compared to low-income countries. The ultra-processed food is a classification of processed

foods which have undergone several processing steps before finally produced (Cannon et al.,

2019). Despite the health complications of the processed foods, the industry has brought

different opportunities in the economy of the country, be it to businesses’ revenue or job

opportunities for the people.

During the pandemic, different industries had suffered negative impacts in their

operations and revenues, including the manufacturing and food industry. The driving force

for the recovery of the food processing industry is the research and development investments,

especially investments in technology. The investment is expected to result in the recovery

and sustainable growth of the industry.

Acquisition

The decision on the acquisition of Ligo Sardines, a leading brand in the sardine

category, was finalized by Century Pacific Food Inc. in the year 2021. The Po family, the

owners of the family led tuna canned company commented that the acquisition was based on

the belief that both companies have potential synergies in both selling and distribution and

that the decision would further improve supply chain and marketing. Additionally, the

company states that its long-standing business would further improve the existing reputation

of Ligo Brand (Gonzales, 2022).

The type of strategical acquisition used by Century Pacific Food Inc. is referred to as

a horizontal acquisition, a type of acquisition that refers to bigger companies acquiring

smaller companies in the hopes to increase market share and productivity. According to

Goedhart (2017), “Often, relatively small companies with innovative products have difficulty
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reaching the entire potential market for their products. Small pharmaceutical companies, for

example, typically lack the large sales forces required to cultivate relationships with the

many doctors they need to promote their products. Bigger pharmaceutical companies

sometimes purchase these smaller companies and use their own large-scale sales forces to

accelerate the sales of the smaller companies’ products.”

Acquisition gradually increased in popularity as the world underwent various

economic, political, cultural, and technological advances over time. These changes are

evident in how well each business performs in creating opportunities for economic

development and expansion. DePamphilis (2008) explain an acquisition as a condition in

which the possession and control of a certain enterprise or certain asset of one industry

become vested in another. So, among the causes that contributed to a surge in the acquisition

were the industries' desire to create well-known entities to compete, their pursuit of profit and

success, and their increased sustainability and higher returns. In such situations, a better

approach to expand one’s presence in an industry may be that of acquiring a business

(Soberman, 2022).

Additionally, a wide range of sectors are engaging in acquisitions for a number of

reasons, including economic, strategic, synergistic, diversificational, and non-economic ones.

Synergy and economic motives, however, are the two that have the greatest impact when it

comes to acquisitions. In fact, the industry is anticipated to produce synergies in such a way

that it will increase value in accordance with its operations. This enables businesses to

operate more effectively and efficiently as a whole. Being economically powerful is also

essential since it results in a larger market share, greater consumer influence, and less intense
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competition. This is due to the ability of the merger of two or more businesses to support

commercial operations (Masita et al., 2022).

Financial Performance

It is essential to evaluate a company's financial performance using financial ratios to

identify its strengths and flaws. This data is necessary for assessing the management of the

company's previous performance and for thinking through the creation of upcoming business

strategies (Fatihudin & Mochklas, 2018). The relationship between the items on the balance

sheet and profit and loss account is established correctly to assess financial performance

(Makkar and Singh, 2013). According Stobierski (2020), in order to understand how the firm

is operating, financial statement analysis entails reviewing the important financial statements.

Therefore, Financial analysis, often known as ratio analysis, is the act of creating pertinent

associations and includes the calculation of financial ratios. There are several financial ratio

such as Liquidity, Activity, Solvency, and more. Thus, it is important to know and

understand these ratios in order measure the financial performance. 

In a study conducted by Yunus et al., Comparative analysis of financial performance

before and after acquisition: A Study in Acquiring Company Listed in Indonesian Stock

Exchange, Period of 2012-2018 2021, In order to compare the financial performance of firms

before and after acquisition in those listed on the Indonesian Stock Exchange, Financial ratio

such as Liquidity Ratio, Activity Ratio, Solvency Ratio, Profitability Ratio, and Market Ratio

was used. According to Fahmer, Irham (2012), A company's liquidity ratio measures how

well it can satisfy its short-term obligations. Thus, to measure a liquidity of a company,

Current ratio must be determined. According to Frase & Ormiston (2004), the most popular
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ratio for gauging a company's degree of liquidity is the current ratio. The corporation is

thought to be better capable of paying down its current liabilities the higher the current ratio. 

The activity ratio is used to gauge how well a business utilizes its resources to support

its operations. The better the corporation does in managing its assets, the higher the activity

ratio. One of the ways to measure the Activity ratio is the Total Assets Turnover Ratio

(TATO), gauges how well an organization uses its assets to generate revenue. Effective firm

asset management will result from high asset turnover. (Frase & Ormiston, 2004). 

According to Sofyan (2013), when a corporation is liquidated, its capacity to satisfy

all of its debts with all of its assets is measured by its solvency ratio. The firm's financial

success is impacted by the solvency ratio, which explains why this ratio and the share price

of the company are related. Thus, the debt-to-equity ratio, which calculates how much of the

company is financed by debt, shows how much of the capital owners' debt—both short-term

and long-term—to outside parties is covered by equity. Leverage ratio is another name for

this ratio. Also, Sofya (2013) mention that lower debt to equity ratio is favorable. The

optimal ratio for external security is one in which capital is greater than debt, or at least equal

to it.

The company's capacity to deliver certain returns on assets and capital stock is

measured by the profitability ratio. The ability of the business to make significant profits is

improved by a higher profitability ratio. This may draw investors, which will ultimately lead

to an increase in the company's stock price (Mamduh and Abdul Halim (2005). To measure

this ratio Net profit margin, Return on Asset, and Return on Equity will be use. The net profit

margin assesses profitability after taking into account all revenues and costs, including
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interest, taxes, and non-operating expenses (Frase & Ormiston, 2004). According to Mamduh

& Abdul Halim (2005), Return on Assets (ROA) is a ratio that assesses a business' capacity

to produce net income in relation to a specific level of assets. While Return on Equity (ROE)

gauges a company's capacity to make money off of a specific amount of capital stock.

Market ratio is used when determining or measuring the value or the price of the

stock of a company, this may consist of Earning Per share (EPS). Earnings per Share (EPS) is

a measure that shows how much profit investors or shareholders made per share (Darmadji

and Fakhruddin, 2001). The greater the value of EPS, the happier the shareholders are

because they are receiving larger profits.

In a study of Satryo et al., Title, the influence of profitability ratio, market ratio, and

solvency ratio on the share prices of companies listed on LQ 45 index 2017. in the study they

study if there is influence in the share price of the listed companies. It was found that while

Earnings per Share (EPS) and Price to Book Value (PBV) have an impact on share price,

Return on Assets (ROA), Return on Equity (ROE), Debt to Equity Ratio (DER), and Debt to

Assets Ratio (DAR) do not. 

Statement of the Problem

Century Pacific Food Inc. Acquired Ligo Sardines, one of its rivals in the canned food

industry in the country. This study aims to analyze the financial performance of Century

Pacific Food Inc before and after its acquisition of Ligo Sardines in the year 2019-2022

1. How is the financial performance of Century Pacific Food Inc. described before and after

acquisition of Ligo Sardines?

a. Liquidity ratio
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b. Activity ratio

c. Solvency ratio

d. Profitability ratio

e. Market Ratio

2. Is there a significant difference between the financial performance of Century Pacific Food

Inc. before and after the acquisition of Ligo Sardines?

This study would also like to test the following hypotheses:

Ho1: There is no significant difference in the Liquidity ratio of Century Pacific Food Inc.

before and after its acquisition of Ligo Sardines in the periods of 2019 to 2022.

Ha1: There is a significant difference in the Liquidity ratio of Century Pacific Food Inc.

before and after its acquisition of Ligo Sardines in the periods of 2019 to 2022.

Ho2: There is no significant difference in the Activity ratio of Century Pacific Food Inc.

before and after its acquisition of Ligo Sardines in the periods of 2019 to 2022.

Ha2: There is a significant difference in the Activity ratio of Century Pacific Food Inc. before

and after its acquisition of Ligo Sardines in the periods of 2019 to 2022.

Ho3: There is no significant difference in the Solvency ratio of Century Pacific Food Inc.

before and after its acquisition of Ligo Sardines in the periods of 2019 to 2022.

Ha3: There is a significant difference in the Solvency ratio of Century Pacific Food Inc.

before and after its acquisition of Ligo Sardines in the periods of 2019 to 2022.

Ho4: There is no significant difference in the Profitability ratio of Century Pacific Food Inc.

before and after its acquisition of Ligo Sardines in the periods of 2019 to 2022.
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Ha4: There is a significant difference in the Profitability ratio of Century Pacific Food Inc.

before and after its acquisition of Ligo Sardines in the periods of 2019 to 2022.

Ho5: There is no significant difference in the Market ratio of Century Pacific Food Inc.

before and after its acquisition of Ligo Sardines in the periods of 2019 to 2022.

Ha5: There is a significant difference in the Market ratio of Century Pacific Food Inc. before

and after its acquisition of Ligo Sardines in the periods of 2019 to 2022.

Research Framework

Figure 1

Conceptual Framework
Before the acquisition After the acquisition

 Liquidity ratio  Liquidity ratio

 Activity ratio  Activity ratio

 Solvency ratio Ho1 Ho2 Ho3 Ho4 Ho5  Solvency ratio

 Profitability ratio  Profitability ratio

 Market Ratio  Market Ratio

The conceptual framework has been separated into two sections: before the

acquisition of Ligo sardines. The first phase of this framework is gathering financial data

from Century Pacific Food Inc financial statements before and after the acquisition.

Afterward, the information acquired will be tested using several financial ratios such as the

liquidity ratio, activity ratio, solvency ratio, profitability ratio, and market ratio. Furthermore,

the following phase includes the collection of the financial data from Century Pacific Food
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Inc financial statements after the acquisition. Afterward, the information acquired will be

tested using several financial ratios such as the liquidity ratio, activity ratio, solvency ratio,

profitability ratio, and market ratio. Finally, all data collected and tested before and during

the acquisition will be used to test the study's hypotheses.

Figure 2

Operation Framework

Performance
Collection of Financial Analysis and Interpretation of Comparative
of Statistical
Data Data Analysis
Tests

Descriptive Descriptive Test of

Statement analysis and analysis and normality of
Statement of SOP 3: Test of
of Financial interpretation interpretation data using
Financial hypothesis
Position of financial of financial Shapiro-
Position and
and ratios before ratios after Wilk test
Statement of
Statement the the
Profit and
of Profit acquisition acquisition
Loss
and Loss Performance
after the
Before the of Paired
acquisition
acquisition Sample T-
(2021 and
(2019 and Test if data
2022)
2020) is normally
distributed

Performance
SOP 1 and 2: Financial
of Wilcoxon
Performance in terms of
signed-rank
Liquidity, Activity,
test if data is
Solvency, Profitability, and
not normally
Market Ratio before and
distributed
after the acquisition

Analysis of the
Related Notes
and Results
from Prior
Testing

Conclusions and
Recommendations